Lesson 8 - Mergers and Acquisitions (Reading) Flashcards
takeover
the transfer of control from one ownership group to another
acquisition
the purchase of one firm by another
merger
the combination of two firms into a new legal entity
cash transaction
the receipt of cash for shares by shareholders in a target company
share transaction
the offer by an acquiring company of shares or a combination of cash and shares to the target company’s shareholders
amalgamation
a genuine merger in which both sets of shareholders must approve the transactions (cdn term for merger)
going private transaction or issuer bid
a special form of acquisition where the purchaser already owns a majority stake in the target company
fairness opinion
an opinion provided by an independent expert regarding the true value of a firm’s shares, based on an external valuation; particularly difficult given that, with a controlling shareholder, there is little possibility of any other party buying the shares
tender
to sign an authorization accepting a takeover bid made to target company shareholders
creeping takeover
the acquisition of a target company over time by the gradual accumulation of its shares
friendly acquisition
the acquisition of a target company that is willing to be taken over
offering memorandum
a document describing a target company’s important features to potential buyers
data room
a place where a target company keeps confidential information about itself for serious potential buyers to consult
confidentiality agreement
a document signed by a potential buyer to guarantee the buyer will keep confidential any information about a target company that is available in the data room and will not use the data to harm the target company
due diligence
the process of evaluating a target company by a potential buyer
letter of intent
a letter signed by an acquiring company that sets out the terms of agreement of its acquisition, including legal terms
no-shop clause
a clause in a letter of intent stating that the target agrees not to find another buyer, demonstrating its commitment to close the transaction
break fee
a fee paid to an acquirer or target should the other party terminate the acquisition, often 2.5 percent of the value of the transaction
asset purchase
a purchase of the firm’s assets rather than the firm itself
hostile takeover
a takeover in which the target has no desire to be acquired, actively rebuffs the acquirer, and refuses to provide any confidential information
tender offer
a public offer in which the acquiring firm offers to purchase shares of the target firm from its existing shareholders
arbs
short for arbitrageurs; specialists who predict what will happen in takeovers and buy and sell shares in target companies, with the possibility of earning a premium
defensive tactic
a strategy used by a target company to stave off a takeover or to try to get the best deal for its shareholders
shareholder rights plan/poision pill
a plan by a target company that allows its shareholders to buy 50 percent more shares at a discounted price in the event of a takeover, which makes the target company less attractive
selling the crown jewels
the sale of a target company’s key assets, which the acquiring company is most interested in, to make the target company less attractive for takeover
white knight
an entity that rescues a target company from a hostile takeover by making a counter bid
horizontal merger
a merger in which two firms in the same industry combine
vertical merger
a merger in which one firm acquires a supplier (“going backward”) or another firm that is closer to its existing customers (“going forward”)
conglomerate merger
a merger in which two firms in unrelated businesses combine
cross-border (international) m&a
a merger or acquisition involving a Canadian and a foreign firm as either the acquiring or target company
synergy
value created from economies of integrating a target and acquiring company; the amount by which the value of the combined firm exceeds the sum value of the two individual firms
over-capacity m&a
a merger or acquisition that occurs when an industry has too many firms operating in it
geographic roll-up
the creation of a national firm from a series of regional ones
extension m&a
a merger or acquisition that extends a firm’s expertise
